Friday, January 6, 2012

Leap Plans "Bursty" Pricing

Leap Wireless has announced it plans to launch session-based data services over its existing tiered data pricing structure, a move that will allow "Cricket" customers to purchase faster data speeds for short periods of time. The company said it will launch the service in the first half of 2012.

The ability to temporarily pay for expedited or faster access is one example of on-demand pricing, congestion pricing or value-based pricing. But Leap is relatively unusual among mobile service providers, most of whom do not yet see the need or benefits of moving to value-based pricing mechanisms. 

There always is a tension between operational simplicity and sophistication in retail customer packaging and network management. Simple approaches often are cheaper, but at the cost of forfeiting creation of more-nuanced subscriber plans.

Likewise, policy management tools that can prioritize and shape bandwidth consumption can help service providers alleviate congestion and provide higher end user experience, where regulators allow such tools to be used. But there appear to be lots of trade offs.

Most executives would agree that flat-rate billing for unlimited use is a difficult and likely unsustainable retail packaging model for broadband access, especially in the mobile services realm. 

But what should be the replacement? That seems to be a tougher question. There always is a tension between simplicity and value where it comes to pricing, billing and retail packaging. 

As a corollary, executives must weigh “pricing by value,” or “pricing by application,” which means more complexity for consumers, or some simpler “pricing by consumption” approach.

Leap CEO and President Doug Hutcheson appears to believe that "pricing by value" will make sense for consumers, and also can be made simple enough that consumers will understand the value proposition. 

"The next big step for us that we believe is important is to add what's called session-based capability on top of that [tiered pricing]," Hutcheson said. "And that will give us a lot more rate plan flexibility."

Cricket might have more incentive than many other service providers to do so, though, as Cricket competes in the value segment of the mobile market. That suggests users frequently might prefer lower monthly charges, but occasionally have the need to consume more data, or occasionally ramp up speed. 

"Should you have a very low amount of data but want to buy more within a month, you'll have the ability to buy sessions or time periods where you can accelerate that speed, and it will be done very simply and very straightforward over the device or on a simple transaction with us," Hutcheson says. Leap to launch session-based pricing

A related idea is that applications have distinct and different value, and that pricing could reflect end user value. Few mobile service providers have been willing to attempt that sort of pricing, either. 

No comments:

Post a Comment